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China bids $23 billion for Micron

In a bold move to put China at the forefront of semiconductors, Tsinghua Unigroup has bid $23 billion to buy Micron Technology. The deal would fill one of the biggest strategic holes in China’s chip industry but is expected to raise political issues all the way to the U.S. White House.

The Wall Street Journal reported the bid after close of the U.S. stock market. With $16.8 billion in revenues last year, Micron is the second-largest chipmaker in the U.S. following Intel.

The deal makes sense for China but could become a political football in the U.S. where a presidential campaign is already in full swing.

China is trying to close a $150 billion trade deficit in semiconductors. It consumes a third of world’s chips but only produces about 12 percent of them.

Last year, China announced a $20 billion investment fund to develop its chip industry. The resulting spending could be as high as $100 billion after contributions from provincial governments and local industry are included.

Tsinghua Unigroup, an investment arm of Tsinghua University, has been on the forefront of the latest deals. It brokered the deal to merge Spreadtrum and RDA, two of the country’s top players in mobile SoCs. The deal later attracted a $1.5 billion investment from Intel, which has long struggled to carve out a position for itself in smartphone chips.

Tsinghua likely will seek contributions from China federal and regional governments as part of the Micron bid, said Samuel Wang, a China analyst for market watcher Gartner. “It looks to me like a situation where they propose the deal first, and find the funds later,” Wang said.

The China government is contributing $200 million to a $780 million deal from a chip packaging company in Jiangsu province for STATS ChipPAC a packaging specialist based in Singapore. It marks one of the first big checks written as part of the country’s $20 billion semiconductor investment fund, said Allen Lu, president of the China branch of the SEMI trade group.